Agreements on avoiding double taxation were the focus of a series of workshops for employees of the Tax Administration of the Republic of Serbia (PU Serbia) in September and October, as part of the project "EU support for Public Finance Management." The workshops aimed to strengthen administrative cooperation, harmonise with EU standards, and improve understanding of Serbia's obligations regarding the activities of the OECD and the UN in the area of cross-border tax treatment.
At the same time, the workshops aimed to support the development of PU Serbia’s technical expertise in understanding and applying agreements on the avoidance of double taxation, which are crucial for fostering transparent and effective cross-border tax cooperation. The series of experience-sharing sessions with PU Serbia’s staff was led by the renowned expert in this field, Mr. Dejan Dabetić.
The Republic of Serbia has agreements with 64 countries to avoid double taxation. Mr. Dabetić clarified exactly which taxes are covered by these agreements: “The avoidance of international double taxation (DTA) through solutions in bilateral agreements on double taxation concluded between contracting states relates to income tax for citizens, income tax for legal entities, as well as property tax in a static context.”
Dejan Dabetić states that Serbia, from the perspective of the OECD and the UN, is among the countries that are gaining recognition for their, as he mentions, "not insignificant contribution to the further affirmation of the importance of DTAs."
In other words, for a state of the 'calibre' of the Republic of Serbia, the number of agreements on the avoidance of double taxation with 64 countries is commendable. It is important to note that DTAs are in force with our most significant foreign trade partners: out of the 27 EU members, DTAs are in force with 26 of them — Portugal is the only exception. Additionally, DTAs are in force with all the countries of the former SFRY, as well as with the so-called economic tigers of South and Southeast Asia: Singapore, Hong Kong, South Korea, along with India, the Russian Federation, the People's Republic of China, Japan, Canada, some African countries, and the Middle East, among others,” says Dabetić.
He includes in that number the countries where the DTA is not yet in force but is in various stages of negotiation: an exchange of the Draft Agreement has taken place; negotiations are ongoing; the DTA has been initialled, meaning discussions are happening about the date and location of signing; the DTA has been signed—its entry into force is anticipated—as well as the commencement of its application.
When we consider all this, we are close to the number of 100 countries, which, in itself, supports the aforementioned recognition and respect of the Republic of Serbia, in terms of its presence on the international stage," says Dabetić. He stresses that it is always possible to find a legal mechanism to prevent double taxation.
“This is achieved primarily by increasing the number of concluded DTAs, implementing the solutions outlined in their provisions, and raising awareness among taxpayers as well as the entire professional community about the economic benefits and significance of concluded DTAs. Supporting this, there is official OECD data indicating that today, there are approximately 4,000 agreements worldwide on the avoidance of double taxation”, he says. However, double taxation in practice, as Dabetić explains, most often occurs due to taxpayers' insufficient knowledge of the conditions necessary to realise the benefits of these agreements, which are directly prescribed in their articles.
"The mentioned solutions from DTA are, for taxpayers, in many ways more favourable than the solutions from the domestic tax legislation of the contracting states that are applied in a situation when the DTA has not been concluded," says expert Dabetić.
Discussing the topic is challenging without mentioning the citizens of the Republic of Serbia who, with or without their families, live and work abroad.
For the purposes of applying the DTA, citizens originally from the Republic of Serbia, who are colloquially called ‘gastarbeiters’, are considered tax residents of the countries they reside in, and not tax residents of the Republic of Serbia. This means that these citizens, in their home country of tax residence (e.g., Germany), primarily pay tax, covering all income earned there as well as worldwide, including income earned in the Republic of Serbia, their country of origin and ancestral homeland.
The solutions contained in the DTA enable the mentioned ‘gastarbeiters’ to avoid double taxation in a situation where they, as tax residents of countries like Germany, earn income in the country of their non-residence or source of income (such as the Republic of Serbia). Consequently, they are subject to taxation both in their home country of residence (Germany) and in the country of their non-residence or source of income (Serbia).
Dejan Dabetić expects that the workshops with employees in the Tax Administration of Serbia will help strengthen the capacity of PU Serbia and improve its readiness for quality interpretation and application of concluded DTAs.
A series of workshops is organised within the framework of the project "EU Support for Public Finance Management," which is financed by the European Union and implemented by the United Nations Development Programme (UNDP), in partnership with the Centre for Excellence in Finance (CEF) and the Ministry of Finance of Slovakia.